New House, New Budget

Since moving to the new house, I’ve had to make some pretty drastic changes to my budget. Not only did I combine finances with my husband, but our expenses are now entirely different because of me working from home, and the increase in rent. I’m also now saving for retirement and adding money to my emergency fund. Finally, I’m no longer paying off debt, which is a huge change from the way my budget used to be.

My new budget actually looks a lot more normal than my old budget. I used to send over 50% of my income to debt every month, while spending about 5% of my income on housing. That’s a completely out of whack budget, but it worked for me at the time. In case you were wondering, here’s what a normal, or “balanced” budget is supposed to look like:

A typical well balanced budget.

This budget would be considered balanced by most personal finance experts. By balanced I mean no portion is ridiculously high. You don’t want the housing wedge to be 50% of your expenses because if you lose your job it’s going to be really tough to make those rent payments. The same goes for having high transportation and debt wedges (unless you are voluntarily shovelling loads of cash to your debt, like I was). Savings, on the other hand should never be less than 10% (unless you’re paying off debt).

Here’s what my budget looks like today:

My budget as of January 2014

Savings

As you can see I’ve got 31% of my combined family income going towards savings. This accounts for my retirement, travel, and emergency fund savings. I’m pretty happy with this savings level but of course whenever I can find savings within my budget, I’ll funnel that extra cash flow over to savings. I’d love to eventually get to the point where I’m saving half my income.

Housing

Housing is at a very comfortable 25% of my combined family income. We managed to negotiate a $100 discount from our land lord in exchange for allowing them to use some of our excess space. This is a nice bonus and we’re going to keep our ears open for any ways we can help them out in the future that might translate into further discounts. I’m really happy with the price I’m paying for our house right now, but I’m always up for savings!

Transportation

Transportation is deliciously low. This is because I paid off my car loan and now all we have to pay for is gas, maintenance and insurance. I haven’t lowered my budgeted gas amount, even though I use my car much less because I’m working from home. Instead any cash I don’t spend on gas gets rolled into my newly created car maintenance fund. I’m hoping this will cover small repairs like oil changes and tire changes.

Debt

This is the best part about having no debt – the savings! I used to throw more than 50% of my income towards my debt every month. Now that it’s gone, I can saving for retirement, live in a better house, and increase my personal living expenses a wee bit.

Other Living Expenses

Other living expenses is a little high, and I’m going to make a point to reduce it closer to the recommended 25% mark. It’s high right now for two reasons:

We’re saving money to furnish our new house.

I haven’t been as diligent about not letting unnecessary expenses creep into our life.

So it’s a little high right now, and I’m going to take some steps to reduce it down closer to 25% of our net income.

I’m really excited about our new budget because it has so many things it in that I’ve been wanting for a long time, but it’s still very balanced. It has room for a nicer place to live, a little bit of spending money for furniture, lots of saving, and most importantly: no debt!

What does your budget look like? Is it “balanced” or are you throwing lots of money into debt or savings? I want to know!

Stay Up To Date

I’m putting about 35% of my money towards debt, which is mostly possible because my housing is 25%. When I finish paying off my debt, even if I funnelled 10% back into life, etc I would still be able to save 25%. Which is awesome!

My pie chart is a little out of whack thanks to a high car payment and gas costs. I’d like to pay off the car, and move closer to my daughters school sometime this year to hopefully balance things out.

I don’t know many people in NYC who have a balanced budget. I’d say most of them are paying at least 40-50% of their income to rent alone.

Emily @ evolvingPF

It’s funny to look at what various people think is ideal or balanced or just reality as living expenses vary with geography, life stage, etc. I’m pretty happy with our budget breakdown now because we live in a smaller city and housing and transportation are not too expensive, but we’ll come to a completely new equilibrium once we move.